Brent Crude to Trade in Range-Bound Pattern

Brent Crude to Trade in Range-Bound Pattern

VoM News Desk | December 26, 2023 | 02:28 PM IST | Energy | Follow on Google News

Brent Crude to Trade in Range-Bound Pattern

Brent Crude to Trade in Range-Bound Pattern

Brokerage house Emkay Wealth Management, the advisory arm of Emkay Global Financial Services, predicts that Brent crude will trade in a range-bound pattern in the near term, with a likelihood of some decline. Currently, it is trading at around $80 per barrel.

Over the past month, global crude oil prices have been trading in a narrow range.

The note highlights conflicting factors impacting oil prices, such as the potential for short-term demand destruction and anticipated long-term growth in demand from India and China.

Emkay suggests that elevated prices act as a self-correcting mechanism, with recent observations indicating a notable decline in US fuel consumption during the holiday season.

The brokerage also quotes an International Energy Agency (IEA) report, stating that data indicates a significant drop in US gasoline consumption to levels not seen in two decades.

Emkay notes that a decline in fuel prices from current levels could have a positive impact on global inflation, particularly benefiting import-dependent economies such as India, China, and parts of Europe. This, in turn, could lead to a more accommodative or soft monetary policy in the upcoming quarters.

Crude oil prices have experienced a roller coaster journey this year, reaching a peak at $130.5 per barrel in March 2022, followed by a 40% decline due to robust Russian flows, a slowdown in Western countries, and a lackluster economic recovery in China. In May 2023, oil prices hit a 17-month low of $63.64 per barrel due to concerns of contagion from the failure of a US regional bank.

However, prices started increasing in late June, driven by OPEC+ output cuts tightening the physical oil markets. Then, in October, prices rose further following a Hamas attack on Israel, threatening Middle East tensions. Nevertheless, prices declined in Q4 2023 due to the absence of supply disruptions from the war, increased non-OPEC supply, deteriorating demand prospects, and a seasonal lull in demand.

Meanwhile, brokerage house Kotak Securities also predicts that anticipated slowdowns in supply growth in the upcoming year may prompt OPEC+ to make efforts to maintain the $80 per barrel floor.

However, the decisive factors influencing prices will be how the demand scenarios unfold in the United States and China, cautions the brokerage.

VoM News Desk

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